Is now the time to buy into the delivery sector?

Most aren’t new companies, of course. Operators such as online-only supermarket Ocado and takeaway delivery providers Deliveroo and JustEat, have been a major presence for years. However, delivery is a rare sector to see its stock rise rather than diminish during COVID-19.

With restaurants closed until recently and now operating under severe restrictions, food delivery in particular has been booming. Despite an initial dip towards the end of March, blamed on fears that food could transmit coronavirus, Yelp calculates that food delivery orders have nearly doubled since the start of lockdown. What was once merely a secondary source of extra business for most restaurants rapidly became their only income stream. While restaurants suffered, delivery apps raked in business.

But it’s not just takeaway food that has had people turning to delivery. Providers across numerous sectors are doing big business during the pandemic. Grocery deliveries have become more important than ever for vulnerable people shielding at home, resulting in some food delivery services offering grocery delivery from supermarkets, such as the recent tie-up of Uber Eats and Asda.

Subscription service Glossybox delivers monthly supplies of beauty products to people’s doors. Greetings card company Moonpig had seen a huge surge in demand, with app downloads tripling in the wake of lockdown. Even laundry has benefitted from the stay-at-home economy, with on-demand laundry and dry-cleaning service Laundryheap expanding into five new international markets during the pandemic.

The major market players have long been rapidly expanding their delivery capabilities and diversifying their offerings. If anything, coronavirus seems to have only sped this process up.

According to the latest report from global ecommerce insights firm Edge by Ascential, online giant Amazon increased its UK ecommerce market share from 28.8 per cent in 2018 to 30.1 per cent in 2019. A Study by Mintel in early 2019, meanwhile, found that almost 90 per cent of UK shoppers use Amazon and more than 25 per cent of British adults are signed up to its Prime service.

But it’s not slowing down there. Illustrating its anticipated sales growth, Amazon is currently opening new UK fulfilment centres (locations where its orders are processed) at a rate of at least one per fortnight. Since the onset of the coronavirus crisis, Amazon has created 15,000 new full and part-time warehouse and delivery driver jobs in UK goods fulfilment centres and across its logistics network.

The company is also rolling out its “Ultra Fast Fresh” delivery service across the UK over coming months, despite setbacks relating to the coronavirus crisis. While, in April, it was revealed that Amazon planned to merge its Amazon Fresh grocery delivery service with its super-fast delivery arm Prime Now in the UK, retrofitting nine of its warehouses to handle, fulfil and deliver fresh produce in a matter of hours.

Delivery company Hermes, meanwhile, is creating 10,500 jobs, as it looks to hire 1,500 full-time staff across its delivery network and head office, along with 9,000 freelance couriers.

The German firm, which has operated in the UK since 2000, already has a network of more than 15,000 self-employed couriers across the country. The company says it is investing £100 million in its expansion and that it has already opened 90 new sub-depots so far this year.

As an integral part of the digital economy, this is a sector that’s also ripe for disruption by savvy, innovative new companies. The kind of businesses that might just need that bit of outside investment to help them make their bright idea the next Laundryheap, or even Deliveroo.

What does the post-coronavirus economy hold for delivery companies?

For someone looking to make an acquisition, then, it may seem like a no-brainer to take a chance on a delivery company, at a time when their stock has never been higher. However, firstly, it’s important to consider whether this booming business will continue post-coronavirus, or whether it will subside as people embrace being out-and-about once more.

This will be a concern for many delivery companies, especially those that have seen recent success but didn’t previously have an established market presence. While it will doubtless take time for consumer confidence to fully rebound from the battering social distancing has delivered, it is certainly possible that delivery companies will see slower business if consumers return en-masse to brick-and-mortar businesses once coronavirus is finally over.

A world with no social distancing whatsoever is of course some way off as long as there is no COVID-19 vaccine, but it’s something that anyone looking to enter the delivery sector should consider. The decent numbers of people who have flocked to pubs and shops as lockdown has eased potentially show an eagerness among consumers to be out in public.

Conversely, there is the perspective, which we have covered in previous insights, that COVID-19 will in fact speed up a shift towards ecommerce and that habits such as the use of delivery apps will only become more deeply embedded as a result of the pandemic.

The arguments in favour of this view are clear. Primarily, consumers are likely to have become used to the convenience (and safety) offered by delivery. This will potentially have seen existing customers form even more of a habit. While lockdown will have introduced such services to a whole new customer base, for example, many older people who had never done their grocery shopping online may have had to do so during lockdown in order to shield.

There are already signs that this may prove to be the case. According to a Kantar study conducted in China in February, 42 per cent of respondents said that they would use online grocery shipping more in future, compared to just 8 per cent who said they would use it less post-pandemic.

According to Xian Wang, Senior Director of Product and Content at Edge by Ascential: "The COVID-19 pandemic has almost certainly had a lasting impact on the retail sector, reshaping consumer shopping habits, and the priorities for retailers and brands.”

“Most prominently, we're seeing a significant shift to online, as consumers have become reliant on this, following the swathe of store closures globally. This will no doubt lead strong ecommerce players [...] to benefit from this greatly."

While this will no doubt be music to the ears of many delivery companies, it does in fact touch on a potential pitfall of the pandemic for food delivery services. If, as expected, COVID-19 sees swathes of restaurant closures, then this, coupled with a potential post-pandemic desire to dine out, could see some less-established food delivery companies lose out in the long run.

However, such concerns are speculative, and, overall, it seems likely that the popularity of delivery and courier services will only be further consolidated by months of lockdown and social distancing.

Reflecting the huge value and global reach inherent in the delivery market, one of the biggest mergers in an otherwise barren year for M&A has been the £5.8 billion acquisition of US food delivery app Grubhub by Netherlands-based delivery operator Just Eat Takeaway at the beginning of June. The deal came amid interest in Grubhub from rival firm Uber and less than six months after Takeway.com’s £6.3 billion takeover of Just Eat.

The deal saw Just Eat Takeaway expand its combined businesses to cover 25 countries, including the USA, UK, Netherlands and Belgium. It also created the world’s largest food delivery company outside of China, with Just Eat Takeaway and Grubhub processing a combined 593 million order in 2019 and with over 70 million active customers worldwide. The deal has been tipped by many to lead a wave of consolidation in the food delivery sector.

According to Just Eat Takeaway founder and chief executive Jitse Groen, both his company and Grubhub “have a firm belief that only businesses with high-quality and profitable growth will sustain in our sector”. Grubhub boss Matt Maloney meanwhile said that “Combining the companies that started it all will mean that two trailblazing start-ups have become a clear global leader. We share a focus on a hybrid model that places extra value on volume at independent restaurants, driving profitable growth”.

Where are the acquisition opportunities?

The Grubhub acquisition is a huge deal, one that illustrates the sheer scale that the food delivery industry has reached in recent years. However, in the age of the digital and gig economies, the delivery sector is one that is ripe for disruption. This means acquisition and investment opportunities, particularly among new startups.

As with many other digital sectors, imagination is really the only limit on what can break through in the delivery industry. Once a unique, marketable idea has taken root among consumers, the company behind it will be in need of funding in order to grow and meet demand.

A perfect recent example of this is HungryPanda, an online platform founded in Nottingham, UK that provides delivery from Asian restaurants and supermarkets, largely serving Chinese communities in cities.

This USP gave HungryPanda a niche in a highly competitive market and the company further leveraged this by tailoring its app for Chinese-language customers, utilising payment services such as Alipay and WeChat Pay and marketing through the WeChat messaging app. At the start of 2020, HungryPanda had expanded to cover over 30 cities across six countries.

In February of this year, HungryPanda announced that it had raised around €18.3 million in a funding round led by investors 83North and Felix Capital. The company aims to use this funding on hiring and product development and to aid in its continued global expansion, particularly into the USA.

This shows how a delivery startup with a simple niche can leverage its idea for exponential growth. In this case, HungryPanda’s rapid expansion has been possible by tapping into a huge, global population, with an estimated 45 million people of Chinese origin or descent living outside of China.

COVID-19 hasn’t dampened the value of delivery companies targeting a specific market. Reports in recent weeks have indicated that Glossybox’s parent company, online beauty retailer The Hut Group (THG), is considering a potential £5 billion stock market debut. Meanwhile Gousto, a company partnered with delivery firm Yodel offering meal kits with ready-measured ingredients, recently secured £33 million in new funding after lockdown saw its sales surge.



As success stories like Laundryheap, Glossybox and HungryPanda show, the delivery and courier sector is one that is seemingly tailor-made for small startups with a good idea and business model to succeed in. If acquisitive parties bet on the right newcomer, they could well get in on the ground floor of the next big thing.

The COVID-19 crisis has obviously had a devastating effect on many industries, but perhaps its most lasting legacy will be its radical impact on consumer habits. By tapping into tech, niche markets and the flexibility of the gig economy, companies in the delivery sector are perfectly placed to dominate the post-pandemic market. Crucially, with new startups appearing every day, it is an industry that acquisitive parties absolutely must keep a keen eye on.

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